I've been studying the relationship between economic growth and conversion of farmland to urban uses in China, a topic of considerable interest to the Chinese government because of its concerns over food security and because of the social unrest that farmland conversion has been causing in areas undergoing rapid economic growth.

Some research highlights in this area are:

Research Results

References

Land to accommodate urban development in China is provided through requisitions by government officials, suggesting that land availability may be a constraint on urban economic growth. An econometric model of urban GDP growth suggests that land has constrained economic growth in coastal areas but not elsewhere. Elasticities calculated from the estimated coefficients indicate that land availability has a larger proportional impact on economic growth than domestic and foreign investment, labor supply, and government spending. The estimated parameters provide evidence about arbitrage opportunities created by discrepancies between urban land value and compensation for requisitioned rural land, suggesting rural unrest associated with conversion of farmland to urban uses may have some economic roots.

Reforms in governance and local government finance during the 1990s have given Chinese local government officials both the means and incentive to act as land developers, creating a bias toward urban spatial expansion relative to redevelopment of existing urban centers and resulting in land use patterns similar to those that would be generated by transactions in markets with private land ownership--even though land in China remains publicly owned. These reforms have also undermined the central government's ability to control urban spatial expansion (and thus farmland loss) by administrative means.

Contrary to the concerns of the Chinese government, conversion of farmland to urban uses does not threaten China's food security. But land is not allocated efficiently and the evidence suggests that too much farmland is converted to urban uses. China's farmland preservation policies are not well suited to rationalizing land use because they ignore local governments' incentives for converting farmland.